Insight

Ocean freight shippers need to think short term

Plummeting freight rates and persistent overcapacity have pushed ocean carriers to cut costs so much that their service quality has suffered. In this environment, shippers—the manufacturers and retailers that use carriers—can’t count on the annual request-for-proposal processes that worked in the past.

At a glance

Unprecedented financial losses have pushed carriers to use cost-cutting tactics like skipped port calls and even suspension of service—with little or no notice for their shipper customers.

In this environment, shippers need more flexible ocean freight procurement models—such as mitigating freight uncertainties through the spot market.

To take advantage of these models, shippers must be well-informed (closely monitoring spot and contract markets on their current and future trade lanes) and flexible (reducing their contract volume coverage level to less than 100%).

To manage evolving procurement methods, shippers need people who have deep knowledge of ocean freight markets, a full understanding of the freight they’re taking to market, improved forecasting abilities, and advanced tools.